Discussion Papers 2025

CIRJE-F-1259	"Does the Global Minimum Tax Restrain Tax Competition?"
Author Name	Makino, Yusuke and Hikaru Ogawa
Date	October 2025
Full Paper	PDF file
Remarks

Abstract
This paper studies the anticipated effects of a Global Minimum Tax (GMT). Although the GMT is widely expected to curb tax competition by raising effective tax rates in low-tax jurisdictions, we show that by weakening direct competition in the short-run, it can induce entry by countries that previously could not participate in the long-run. This entry expands the set of competing jurisdictions and, on this extensive margin of participation, can place additional downward pressure on tax rates. Consequently, the introduction of the GMT need not restrain excessive tax reductions.
Keywords: Minimum tax; Tax competition; Entry

Abstract

This paper studies the anticipated effects of a Global Minimum Tax (GMT). Although the GMT is widely expected to curb tax competition by raising effective tax rates in low-tax jurisdictions, we show that by weakening direct competition in the short-run, it can induce entry by countries that previously could not participate in the long-run. This entry expands the set of competing jurisdictions and, on this extensive margin of participation, can place additional downward pressure on tax rates. Consequently, the introduction of the GMT need not restrain excessive tax reductions.

Keywords: Minimum tax; Tax competition; Entry